UBS analyst sees slow, stable rise in zinc, lead demand, prices
Las Vegas (Platts)--30Apr2009
platts.com
Zinc and lead consumption and prices will steadily rise over the next
three years as economic recovery is slated to start toward the end of 2009 and
into 2010, metals analyst at UBS Bank, Robin Bhar, told delegates at the 2009
ISRI Convention and Exposition in Las Vegas, Nevada, late Wednesday.
"Glancing at the 2010 numbers we see a return to growth, 2010 we see as
the year for recovery," he said. "But the growth will be sub-par, or sub-
normal."
In the US, he saw the recovery beginning in the fourth quarter of the
year, when "we should see the famous green shoots of recovery," he said,
driven by "massive injections of liquidity."
"If you throw enough money at the problem it will solve that problem,"
Bhar said. "And secondly, interest rates around the world will stay relatively
low, perhaps even close to zero."
But the economic growth will come at a cost, and Bhar warned against the
devaluation of currency, projecting that the US dollar would weaken in the
coming months.
Financial growth will impact lead and zinc demand and assist in a price
recovery for both metals, Bhar said.
"In 2009, there was a fair amount of contraction taking place in global
zinc demand, with just over a 10% contraction in demand, due to weakness in
the automotive, building and construction sectors," Bhar said. Unlike in the
past, zinc producers have reacted to market conditions quickly, he added.
"This cycle is different, we estimate that at least 1 million mt of zinc mine
and smelter production has come offline and this has helped to balance the
market."
Global zinc surplus in 2009 is expected to amount to 300,000 mt. That
surplus is expected to shrink significantly in 2010 -- when Bhar anticipates a
5% recovery in global zinc consumption -- to a surplus of just 100,000 mt .
Bhar saw zinc prices at $1,200/mt this year, $1,300/mt in 2010 and
$1,500/mt in 2011.
Lead prices, too, would stage a modest recovery over the next three
years, Bhar said. He noted that lead consumption hasn't been hit as much as
zinc by a weak automotive sector. Lead is a key component in replacement
batteries.
"Lead is slightly different to zinc in that the major consumption for
lead is lead batteries in the automotive sector," Bhar said. "Replacement
battery demand is about 40% of global lead demand and that demand has held up
pretty well during this period."
He forecast that lead prices would reach $1,000/mt this year, before
stabilizing at an average of $1,200/mt by 2010 and strengthen to $1,400/mt in
2011.
The analyst conceded that substitution of lead acid batteries could come
in the form of nickel cadmium batteries, but added that such substitutions
would be limited to smaller applications, such as radios, and were unlikely to
replace lead batteries in automotive applications anytime soon.
"We are still many years away from developing a viable substitute for
lead acid batteries. It won't happen in the next five-10 years," he said.
--Meghann McDonell, meghann_mcdonell@platts.com |
